Car giant Volkswagen has pleaded guilty to three criminal charges in the US in connection with the emissions scandal and will pay a 4.3 billion US dollar (£3.5 billion) penalty.
Six executives at the German car maker have also been charged, the US Justice Department announced as it detailed an elaborate and wide-ranging scheme to commit fraud and then cover it up.
At least 40 VW employees were involved in destroying evidence, the government said.
The penalty against the company is the largest ever levied by the US government on a car maker, eclipsing the 1.2 billion US dollar (£984 million) fine handed to Toyota in 2014 over safety issues related to unintended acceleration.
VW installed software into diesel engines on nearly 600,000 vehicles in the US that allowed the engines to turn on pollution controls during government tests and switch them off in real-world driving.
The software, called a "defeat device" because it defeated the emissions controls, improved engine performance but spewed out harmful nitrogen oxide at up to 40 times above the legal limit.
US regulators confronted VW employees about the use of the software in 2015 following tests conducted by university researchers that showed differences in testing and real-world emissions.
Volkswagen at first denied the use of the defeat device, but finally admitted to it in September of that year. Even after that admission, the government said, company employees were busy deleting computer files and other evidence.
At a press conference on Wednesday, Attorney General Loretta Lynch said: "Volkswagen obfuscated, they denied and they ultimately lied."
The German company pleaded guilty to conspiracy, obstruction of justice and importing vehicles by using false statements in a plea deal. It also requires VW to co-operate in a continuing probe that could lead to the arrest of more employees.
Government documents accuse six VW supervisors of lying to environmental regulators or destroying computer files containing evidence.
In one case, one of the six engine development supervisors is said to have asked an assistant to search another supervisor's office for a computer hard drive that contained emails between them. Once the hard drive was found, another assistant was asked to throw it away.
According to the plea agreement, the supervisors and other employees agreed to deceive the Environmental Protection Agency and other regulators about diesel emissions starting in May 2006, when they realised the engines would not meet emissions standards that would come into effect the following year.
In 2014, VW employees learned about a West Virginia University study that identified emissions discrepancies in VWs. Three of the supervisors and other employees decided not to disclose the defeat device to US regulators, despite increasing questions from the EPA and the California Air Resources Board.
On August 19 2015, a VW employee ignored instructions from supervisors and told US regulators about the defeat devices. A supervisor confirmed the devices the following month.
Volkswagen has previously reached a 15 billion US dollar (£12.3 billion) civil settlement with environmental authorities and car owners in the US, under which it agreed to buy back up to 500,000 vehicles.
About 11 million vehicles worldwide were equipped with the software.